Bayer-Monsanto merger proves fertile ground for agri-business discussions

This Monday, Aug. 31, 2015 photo shows the Monsanto logo at the Farm Progress Show in Decatur, Ill.
This Monday, Aug. 31, 2015 photo shows the Monsanto logo at the Farm Progress Show in Decatur, Ill.

Agri-business leaders had mixed reactions Monday morning as they left a meeting discussing the pending merger between chemical conglomerate Bayer and global seed supplier Monsanto.

About a dozen people attended the private breakfast at the Missouri Chamber of Commerce, which discussed the pending merger and other topics important to the farmer and bio-science communities.

Kelly Gillespie, president and CEO of the Jefferson City-based Missouri Biotechnology Association, said the merger will stimulate innovation. Another local farmer said the merger could make it more expensive for small ag companies to innovate.

In its third attempt to woo Mosanto's board of directors into a merger, Bayer succeeded by raising its bid to $66 billion last September. In August, the European Commission started an in-depth study of the takeover and its effects. In an August statement to Reuters, the European Commission said it has preliminary concerns the merger could reduce competition and result in higher prices, lower quality and less innovation.

To be approved, the deal must clear anti-trust hurdles in about 30 countries, including the United States.

Opponents contend merging two companies of this size could reduce the incentive for the merged company to innovate.

Gillespie, who represents Monsanto, Syngenta, Dow and about 150 other members of the association, said a merger between Bayer and Monsanto would spur innovation within the new company and within the ag-biotech ecosystem by accelerating innovation. Under a merged company, Gillespie said, the chemical and seed sides of the company could time regulatory approvals of complementary new products to eliminate lag time for farmers.

"You need to look at the core functions of the original two companies," Gillespie said. "One was in seed traits. One was on the chemical side. As the new one comes together, the umbrella over it is going to be aware of what each has in the research and innovation pipeline."

Gary Marshall, CEO of the Jefferson City-based Missouri Corn Association, said the two companies don't work in most of the same spaces right now, so the merger won't hurt innovation or price. He said Bayer isn't particularly invested in seed on the corn or even soybean sides. He also said other than its blockbuster pesticide Roundup, Monsanto isn't heavily invested on the chemical side.

"There's not a lot of direct competition," Marshall said. "So we're not going to lose a lot of competition; which we think means we're going to continue to have access to products at a competitive price in the marketplace."

To be approved by regulators around the world, both companies likely will need to make concessions. Bayer announced in May it planned to sell its LibertyLink trait technology and herbicide business to satisfy antitrust regulators.

LibertyLink traits can be found in canola, corn, cotton and soybeans. Monsanto traits can be found in canola, corn, cotton, soybeans and other plants.

Kim Harrison farms cattle near Fulton and owns tech startup 2BuyAg, which connects farmers to food buyers. She said farmers who work with her are concerned primarily about whether the merger will open markets for them.

As a farmer, she's not concerned about the merger and said Bayer is a good company. As the owner of an ag-tech startup, though, she's worried this consolidation will create a behemoth that could make it harder for farmers to navigate the maze of laws when they create new and disruptive technologies.

"When there's a consolidation of innovation, certainly that doesn't keep the ideas from flowing," Harrison said. "But as an independent innovator to commercialize and protect that idea of that product becomes just a little bit harder."

Harrison said she's concerned because large companies may poach and duplicate new ideas from farmers with new technologies, which could increase costs for farmers to fend off litigation.

"It takes a community to support a startup," Harrison said. "When there are less players in the field, then it becomes harder."

If approved, this will be the third blockbuster merger in the chemical and seed sectors in recent years.

In May, Chinese state-owned chemical giant ChemChina completed its $43 billion takeover of Swiss Agribusiness and agrichemical company Syngenta. On Aug. 31, Dow completed its $130 billion merger of DuPont, after nearly two years of navigating regulatory approvals.

Gillespie said the ChemChina-Syngenta merger kick-started the flurry of mergers among six of the world's largest chemical and agribusiness giants. The Bayer-Monsanto merger follows a script created by ChemChina and Dow during their takeovers he said.

"It's in the same inner family," Gillespie said. "That's what started it all. There's a ripple effect in the antitrust oversight of the U.S. government and the EU as they started looking at those companies."